12 Personal Finance Lessons That Changed My Life

If you’re looking for ways to transform your finances, you’re in the right place! Join me as I share the 12 personal finance lessons that changed my life and helped me become financially free. Learn all the tips and tricks so you can achieve your financial goals too!

Doing the right thing with your money isn’t easy. We all make mistakes and hopefully learn from them. Here are 12 personal finance lessons I have learned that have strengthened my personal finances.

1. Investing Isn’t Like ‘Wolf Of Wall Street’… 

at least for most people it shouldn’t be. frantically trying to watch the markets, jump ahead of others, buy the dips and sell at an all time high.

It all seems so… complicated.

… The truth is my investing plan is the complete opposite. It is boring, it is incredibly simple and I don’t really have to do anything with it.

This isn’t about the specifics of where and how I put my money but the lesson I learned after investing for a while and doing my own research is this;

No one can correctly predict the market. Many investors have lost more money by trying to time the market than they would have in the dips that stock or fund experienced.

As Shelby Davis, founder of Davis Selected Advisers, which as of 2021 manages about $37 billion in several funds said;

“History provides a crucial insight regarding market crises: they are inevitable, painful and ultimately surmountable.”

.. and that makes this one of the personal finance lessons that changed my life because I invest regularly into a diverse portfolio, not worrying about what the market is doing right now and hoping to see slow but steady returns over time… a long time.

2. The Rich Aren’t Like You Think They Are

The media tends to show this idea of being rich as well.. showing off i guess. Leading a lavish lifestyle but the truth is often quite different.

The Millionaire Next Door – The Surprising Secrets Of America’s Wealthy, is a book written by two authors who did their own research into millionaires in America.

The authors were surprised to find that it was more common to find the wealthy living in middle class homes, not driving the newest cards and not showing any of the traits we have come to expect from people with that much money.

The logic here is that people that are spending their money on new cars, expensive homes, fancy trips and a luxury lifestyle are, by comparison, neglecting their savings, investments and financial security.

The reason this was an important lesson for me to learn is that, despite what I might try and say to myself, I am influenced by what I see in others. The image of the rich I have grown up with would have been how I wanted to be, a financial goal for me to reach.

The personal finance lessons here are that having a more realistic version of that goal made a big difference to me. I am no longer striving to have these symbols we associate with the rich. Instead my plans are more grounded in.

1. Good financial practices and

2. The things I actually want for ME.

3. You Are The Average Of Your Friends

There have been many social studies on this topic. It’s hard to pin it down to anything accurate and it can be disputed but regardless, it was one of the more controversial personal finance lessons for me.

There is a popular quote that goes ‘you are the average of your 5 closest friends’

I don’t think that it’s true but it is provocative.

The idea is that if you have a friend that spends their money freely, doesn’t have much of a plan, very little to none in savings and goes month to month scraping by. It has an effect on what you see as acceptable and ‘normal’ when it comes to finance.

That will have a knock on effect when it comes to your own personal finances.

The same can be said for exercising and fitness, or eating habits, fashion and allsort of other things.

The lesson for me was realising that we are all influenced. If we weren’t then marketing and advertising wouldn’t be as big a business as it is. Think about all the absurd stories about how much a company paid for product placement in a tv show or something.

This made me try to consider that and look for what I consider positive influence. People that I am happy to influence my thoughts on how personal finance should be managed, financial goals and spending habits.

Don’t ditch your friends but also don’t let them be a bad influence on you.

4. Find Good Value NOT Low Prices

In almost all circumstances a saving is a marketing tool. We make jokes about the non-stop sales that some shops seem to have. It’s become even funnier to look at things like online courses that are seemingly permanently 80% off.

So instead of looking for a big savings, a clearance sticker or what appears to be a low price… be frugal. That’s right, being frugal is different from being cheap.

Linking to my personal finance lessons what I have learned is to think about the value I am getting from the amount I am spending.

So instead of buying the cheapest running shoes – hurting myself & wearing them out quickly – then buying some other ones – getting some in soles to improve them – new socks because of the blisters and so on.

I will spend more money on shoes that fit properly for my feet and running style. I will go to an actual running shop and have my gait measured and get their advice. Spending more money but getting much better value out of the shoes.

It’s one of those money mindset adjustments that once you have it just makes so much more sense.

5. People Aren’t Impressed By Your Spending

Are you impressed when you see someone using the latest and most expensive phone? Do you feel jealous when that runner goes past with the latest bone conduction headphones? Were you in awe of the frivolous gesture by your friend when they paid for your entire group’s meal? 

…..Or instead were you just happy to get a free dinner and you didn’t even notice the other things? 

It can sometimes be different among friends. Your tech mate might be impressed by your phone. A close work colleague that loves cars might be excited to see your new ride.

Adding to my personal finance lessons.. is not to buy something based on how you think others might see it. A stranger seeing you pull up in a new car, with an expensive watch, new phone etc won’t notice, care and certainly won’t be impressed.

Buy those things for YOU. Buy them because they make you happy. If the idea of impressing others is your motivation then, perhaps don’t buy them. Keep the money and use it more wisely.

6. It’s Not Cool To Have No Plan

I think as you get older you look back and wonder why you thought it was cool to be cold. Seriously, it’s cold and wet outside and you’re in a t-shirt, it’s not cool, go put a jumper on.

The same goes for finances, especially in my student days.

Even now I have lots of friends who I would say neglect their finances. They have jobs, kids, mortgages and all that grown up stuff, so yes they have to do something with their money.

It’s usually reactive though. If something goes wrong or even right for them, the decision on what to do is made quickly on the spot.

Planning is essential both personally and professionally.

It helps us achieve our goals, and allows for more efficient use of time and other resources.

Planning means analysing and studying the objectives, as well as the way in which we will achieve them. It is a method of action to decide what we are going to do and why. For that, we have to create a plan.

So if you reverse engineer that. Without a plan we don’t have a method to decide our action, what we are going to do or why.

If you have debts, make a plan of action to pay them off efficiently. Make a timeline, get dates, interest rates, do the work to make a plan and then stick to it.

If you want to go to Disneyworld with the family, make a plan.

Cool or not, plans will make your life easier and your goals more achievable so take this personal finance lesson on board.

7. Stop Focusing On Cutting Back

For the longest time if an unexpected bill came in or something happened my reaction was always – “what can I cut back on this month”. I would always look to take the money away from one thing to put it into something else.

The personal finance lessons learned after I started to manage my budget better, more on that later. I put a lot of effort into meal planning and getting my utilities as low as possible. Then I kind of reached a limit.

That’s when I realised that cutting back has its limits. You will never get your food bill down to zero. Or at least that’s something pretty hard to maintain and it’s not how I want to live.

So now when the car fails the MOT and I have to pay money to get the thing that I don’t know what it does but it is apparently vitally important to have working, I will first ask myself, how could I MAKE this money this month.

There are lots of ways of making extra money, virtual assistance, dog walking, surveys, overtime, promotions, side jobs and well the list just goes on.

The truth is it can’t always be done but I love that it’s now my reaction to think how I can make the money instead of cut back or saving the money from somewhere else.

it’s always the things that you want to spend the money on that you miss out on. So not having to miss out would be great too.

8. Mr. Banks Was Wrong

Money is not ‘best’ in the bank. I was brought up to believe any money you had left after paying out for what you needed and wanted was best left in the bank. Relying on the interest and the safety of banks.

All respected banks are protected by the FCSC for up to £85,000 and with a savings account you will not ‘lose’ any money, the interest rate will not go into negative numbers.

The problem is that inflation exists. The costs of things change and we are seeing that increase higher than ever at the moment. Interest rates are also sitting around at their lowest.

So things are getting more expensive quicker than we are gaining interest on our savings. In short that means the value of what we have in savings is going down, meaning we will be able to buy less with it in a year than we can now.

If this trend continues and you think about that money sitting there for 10 years, it’s kind of going to waste.

So yes, savings are important, an emergency fund is essential for financial security BUT.. a bank is not the ‘best’ place for your money.

This notion of ‘in the bank is best’ goes hand in hand with a lot of other traditional thoughts about money, like the ideal 9 – 5 and if you work hard you’ll get rewarded. It’s not always true.

The personal finance lesson I learned here wasn’t about what IS the best place for my money. Instead it was realising that other options existed and honestly.. That the traditions and way I was brought up to deal with money and income needed to be brought up to date.

9. Stop Guessing And KNOW The Answers

Have you ever been unsure about a cost and just shrugged it off and thought ‘I’m sure it’ll be ok’ or maybe ‘I’ll figure it out later’.

Maybe when going for another round of drinks or saying yes to that meal out.

Then after a series of these and actually looking at your balance and the bills you forgot about you start to wonder what you have done.

That’s the lesson. The problem goes right back to when you made a decision about money without knowing anything about your finances.

The good news that once you learn the lesson there is an easy fix, which then becomes the most powerful finance tool in your arsenal.

The budget. Knowing your income, outgoings, balance, bills, debts etc is vital to making any financial decisions so if you don’t already have a place for all this information start a budget. I have lots of videos about making and using budgets so check out my channel for those.

Taking this a step further, anytime you are unsure of something to do with your money or personal finance in general then do some research. Educate yourself, maybe have a look at this post about the best financial books for beginners.

Look into investment funds, state pension contributions, available personal grants, cryptocurrency and NFTs….  Having more knowledge is always a good thing.

10. A Plan For Every Penny

.. literally every penny and it feels great. Knowing what all of your money is doing, deciding where you are putting it, how it’s going to be used and knowing that whatever comes up you have a plan. It really does let you sit down and relax in a soft pillowy cushion of financial control and stability.

This was not a lesson I learned from anything bad happening. It’s not one of those personal finance lessons.

Simply as my financial knowledge grew and my understanding of money got better I had more and more plans and ways I could use my money.

Now I use a zero based budget every month.

A big part of that is having sinking funds. I look at anything I don’t have to pay for every month but know that I will pay for at some point and put money aside for it. It’s not always the same amount each month but it means I have pots of money sitting there ready for anything that comes up.

An easy example would be something like car insurance. Its cheaper to get it for the year, so I do that. I will take the cost, divide it by 12 and then put that into a ‘car insurance’ sinking fund each month.

Now I have the easy management of monthly payments, the cheaper annual cost from the insurers with the peace of mind that when it comes to pay for the insurance next year the money will already be in place for it.

I have sinking funds for holidays, car repairs, house decorating and anything I think i’ll spend money on at some point.

So think about how you manage your money, get some nice financial goals to work towards and give zero-based budgeting a go.

11. Credit Cards Have A Good Side

Credit card debt is of course a problem for many and because of that the advice to never touch a credit card is pretty prevalent.

If we look at these figures from a study by Forbes

Almost half of people (44%) get their first credit card between 18 and 24 years of age. The average UK consumer spends £333.11 each month on credit cards. With an average credit card debt per person ringing in at £1,174.62, this makes us largely a nation of borrowers. 

However….

…. I have used credit cards for a long time, I pay them off in full, have paid no interest to any of them and have been able to use them to increase my credit score. 

I also get on average £250 back as cashback from my American Express card every year.

So they have cost me nothing and in fact I have earned money from them.

It comes back to some of the earlier lessons about understanding and making wise financial choices. Credit cards are not inherently bad, it comes down to how you use them.

Once I got the hang of using credit cards I not only started making money and getting better deals thanks to an increased credit score but I also found ways I could use them as a money management tool by separating certain expenses exclusively onto a credit card.

12. Use Facts & Figures NOT Emotions

How many times have you regretted an impulse purchase? Or spent money on a credit card to make yourself feel better on a stressful day?

If we look back and imagine the average person has over £1,000 debt on their credit card to pay, how many of those purchases would have been made if the spender considered the purchase based on the facts of their current personal finances rather than their emotionally driven purchase.

I understand that won’t be the case every time, but I think you can probably think of some examples right now of less impressive ways you have used your money and put that down to emotions.

The personal finance lesson…. Try to have good foundational knowledge and USE that when making any decisions about money. It’s not about holding back and missing out. It’s about making good decisions now to keep us financially prepared and stable in the future.